Shifting Health Costs to High Earners

Shifting Health Costs to High Earners

With health care costs climbing even higher during this enrollment season, more employers are adopting a tiered system to pass on the bulk of those costs to their employees by assigning bigger contributions to workers in top salary brackets and offering some relief to workers who make less money.

Across the country, the percentage of workers with coverage in large companies whose premiums vary with their wages climbed to 17 percent in 2010, up from 14 percent two years ago. About 20 percent of employees who are covered by large companies in the Northeast, which has suffered from a combination of high unemployment and steep medical costs, have the premiums they pay tied to their wages, according to Kaiser.

“If health care reform hadn’t happened, there would be more companies going in this direction,” said Ms. Darling, alluding to the interim period between the law’s passage this year and 2014, when it is expected to take full effect.

Often, companies will keep premiums steady or lower for low-income workers by asking them to pay less of the overall increase, while high-income workers will pay more to make up for the difference, according to Joshua Miley, a principal at HighRoads, a Woburn, Mass., health benefits management consultant. Faced with an overall increase of 9 percent, the company might ask the lower-paid workers to pay 4 percent more, while the higher-paid group would pay 14 percent more. “They’re doing it on the backs of the higher paid,” he said.

Companies have also become increasingly creative in the ways they shift costs. Instead of simply raising premiums or increasing the size of the deductible workers must pay before their coverage kicks in, employers are increasingly asking their workers to pay more the cost of coverage for their dependents, or to pay more of their share of a hospital stay or an emergency room visit.

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